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In a personal budget all sources of income are identified and expenses are planned. One way of budgeting originated during the Great Depression. It’s called the envelope system. Basically, for every bill or expense you have you dedicate an envelope to it with the estimated amount written on the front of the envelope. Once you have funds or get paid you put that amount in cash into the envelope. Once the expense is due you take the money out and pay the bill. If you do this for all of your expenses there is no confusion between amounts owed for expenses and other monies in your bank account. Hopefully, by identifying your income and expenses you can also be inspired to save some money for emergencies, or even long term savings goals.

One Response to “Creating A Personal Budget”

Not to throw her under the bus but my girlfriend was pretty bad about handling money and sticking to a budget. She is a compulsive spender and loves to shop. I got her set up with the envelope system of budgeting and it has helped her tremendously. She orders her envelopes by importance and fills them up in that order. At the very end she has an envelope for shopping that she can fill after she has filled the more important ones, including an envelope for savings contribution.